THE CANDLESTICK TRADING BIBLE, Exams of Foreign Trade

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Introduction The Candlestick trading bible is one of the most powerful trading systems in history. It was invented by Homma Munehisa.The father of candlestick chart patterns. This trader is considered to be the most successful trader in history, he was known as the God of markets in his days, his discovery made him more than $10 billion in today’s dollar. I have spent 10 years compiling, testing, organizing, and consistently updating this method to create my own new version, which is considered to be the easiest and most profitable trading system. The Candlestick trading bible is the trading method that is going to finally take your trading to where it should be, consistent, profitable, easy and requiring very little time and effort. This trading system is based on Japanese candlestick patterns in combination with technical analysis. All what you have to do is to spend as much time as you can to master the method that i’am going to share with you and use it to trade any financial market. Learning Japanese candlestick is like learning a new language. Imagine you got a book which is written in a foreign language, you look at the pages but you get nothing from what is written. The same thing when it comes to financial markets. If you don’t know how to read Japanese candlesticks, you will never be able to trade the market. Japanese candlesticks are the language of financial markets, if you get the skill of reading charts, you will understand what the market is telling you, and you will be able to make the right decision in the right time.

The easy to follow strategies detailed in this work will provide you with profit making techniques that can be quickly learned. More importantly, learning the principals of market psychology underlying the candlestick methodology will change your overall trading psych forever. The Candlestick trading bible has already proven itself. Fortunes have been made using the Japanese candlestick strategies. I congratulate you on taking the first step in your trading education, you are on the right path to become a better trader. However, this is actually just the beginning of your trading career, after finishing this eBook, the real work begins. Don’t read this eBook very fast, this is not a novel, you should take your time to understand all the concepts i discussed, take your notes, and go back from time to time to review the strategies i shared with you. Remember, this is an educational work that will teach you professional methods on how to make money trading financial markets. If you got the skills that i shared with you here, you will change completely your life and the life of people around you.

• The engulfing bar strategy
• The inside bar strategy
• The inside bar false breakout strategy
• Trades examples I highly recommend you to master the previous sections before jumping to this section, because if you don’t master the basics, you will not be able to use these strategies as effective as it would be. In this section you will learn how to identify high probability setups in the market, and how to use these candlestick patterns in trending markets and ranging markets to maximize your profits. 6 - Money management In this section, you will learn how to create a money management and risk control plan that will allow you to protect your trading capital and become consistently profitable.

History of candlesticks Candlesticks have been around a lot longer than anything similar in the Western world. The Japanese were looking at charts as far back as the 17th century, whereas the earliest known charts in the US appeared in the late 19th century. Rice trading had been established in Japan in 1654, with gold, silver and rape seed oil following soon after. Rice markets dominated Japan at this time and the commodity became, it seems, more important than hard currency. Munehisa Homma (aka Sokyu Honma), a Japanese rice trader born in the early 1700s, is widely credited as being one of the early exponents of tracking price action. He understood basic supply and demand dynamics, but also identified the fact that emotion played a part in the setting of price. He wanted to track the emotion of the market players, and this work became the basis of candlestick analysis. He was extremely well respected, to the point of being promoted to Samurai status. The Japanese did an extremely good job of keeping candlesticks quiet from the Western world, right up until the 1980s, when suddenly there was a large cross-pollination of banks and financial institutions around the world. This is when Westerners suddenly got wind of these mystical charts. Obviously, this was also about the time that charting in general suddenly became a lot easier, due to the widespread use of the PC. In the late 1980s several Western analysts became interested in candlesticks. In the UK Michael Feeny, who was then head of TA in

that bar chart generate with the added clarity and additional signals generated by candlesticks.

• Candlesticks are used by most professional traders, banks, and hedge funds, these guys trade millions of dollars every day, they can move the market whenever they want. They can take your money easily if you don’t understand the game. Even if you can trade one hundred thousand dollars trading account, you can’t move the market; you can’t control what is going in the market. Using candlestick patterns will help you understand what the big boys are doing, and will show you when to enter, when to exit, and when to stay away from the market.

What is a candlestick? Japanese candlesticks are formed using the open, high, low and close of the chosen time frame.

• If the close is above the open, we can say that the candlestick is bullish which means that the market is rising in this period of time. Bullish candlesticks are always displayed as white candlestick. The most trading platform use white color to refer to bullish candlesticks. But the color doesn’t matter, you can use whatever color you want. The most important is the open price and the close price.
• If the close is below the open, we can say that the candlestick is bearish which indicates that the market is falling in this session. Bearish candles are always displayed as black candlesticks. But this is not a rule.

Candlestick shadows (tails) The upper and lower shadows give us important information about the trading session.

• Upper shadows signify the session high
• Lower shadows signify the session low Candlesticks with long shadows show that trading action occurred well past the open and close. Japanese candlesticks with short shadows indicate that most of the trading action was confined near the open and close.
• If a candlestick has a longer upper shadow, and short lower shadow, this means that buyers flexed their muscles and bid price higher. But for one reason or another, sellers came in and drove price back down to end the session back near its open price.
• If a Japanese candlestick has a long lower shadow and short upper shadow, this means that sellers flashed their washboard abs and forced price lower. But for one reason or another buyer came in and drove prices back up to end the session back near its’ open price.

Candlestick patterns Candlestick patterns are one of the most powerful trading concepts, they are simple, easy to identify, and very profitable setups, a research has confirmed that candlestick patterns have a high predictive value and can produce positive results. I personally trade candlestick pattern for more than 20 years; i can’t really switch to another method, because i tried thousands of strategies and trading methods with no results. I’m not going to introduce you to a holy grail, this trading system works, but be prepared to lose some trades, losing is a part of this game, if you are looking for a 100% wining system, i highly recommend you to stop trading and go look for another business. Candlestick patterns are the language of the market, imagine you are living in a foreign country, and you don’t speak the language. How could you live if you can’t even say a word? It’s tough right???The same thing when it comes to trading. If you know how to read candlestick patterns the right way, you will be able to understand what these patterns tell you about the market dynamics and the trader’s behavior. This skill will help you better enter and exit the market in the right time. In other words, this will help you act differently in the market and make money following the smart guy’s footprints. The candlestick patterns that i’m going to show you here are the most important patterns that you will find in the market, in this chapter, i’m not going to show you how to trade them, because this will be explained in details in the next chapters. What i want you to do is to focus on the anatomy of the pattern and the psychology behind its formation, because this will help you get the

The engulfing bar candlestick pattern The Engulfing bar as it states in its title is formed when it fully engulfs the previous candle. The engulfing bar can engulf more than one previous candle, but to be considered an engulfing bar, at least one candle must be fully consumed. The bearish engulfing is one of the most important candlestick patterns. This candlestick pattern consists of two bodies: The first body is smaller than the second one, in other words, the second body engulfs the previous one. See the illustration below: This is how a bearish engulfing bar pattern looks like on your charts, this candlestick pattern gives us valuable information about bulls and bears in the market.

In case of a bearish engulfing bar, this pattern tells us that sellers are in control of the market. When this pattern occurs at the end of an uptrend, this indicates that buyers are engulfed by sellers which signals a trend reversal. See the example below: As you can see when this price action pattern occurs in an uptrend, we can anticipate a trend reversal because buyers are not still in control of the market, and sellers are trying to push the market to go down. You can’t trade any bearish candlestick pattern you find on your chart; you will need other technical tools to confirm your entries.

The example above shows us clearly how the market changes direction after the formation of a bullish engulfing bar pattern. The smaller body that represents the selling power was covered by the second body that represents the buying power. The color of the bodies is not important. What’s important is that the smaller one is totally engulfed by the second candlestick. Don’t try to trade the market using this price action setup alone, because you will need other factors of confluence to decide whether the pattern is worth trading or not, i will talk about this in the next chapters. What i want you to do now is to get the skill of identifying bearish and bullish engulfing bar on your charts. This is the most important step for the moment.

The Doji Candlestick pattern Doji is one of the most important Japanese candlestick patterns, when this candlestick forms, it tells us that the market opens and closes at the same price which means that there is equality and indecision between buyers and sellers, there is no one in control of the market. See the example below: As you can see the opening price is the same as the closing price, this signal means that the market didn’t decide which direction will take. When this pattern occurs in an uptrend or a downtrend, it indicates that the market is likely to reverse. See another example below to learn more: